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Monday, July 19, 2004
San Diego Union-Tribune 7-17-04
Governor's budget dealing backfires
But his deal with local government groups has backfired, leading to a lengthy budget deadlock that has become the governor's first real setback since he took office in November.
An impressive string of victories, among them changes to workers' compensation and a $15 billion deficit-reduction bond, ended when the state entered the new fiscal year July 1 without a budget.
Now Schwarzenegger, who wanted an on-time budget to symbolize a new era of bipartisan cooperation, is right where he didn't want to be – locked in a finger-pointing blame game with Democratic legislators with no budget in sight.
"You take your best shot, and sometimes things work and sometimes they don't," Senate President Pro Tempore John Burton, D-San Francisco, said of the governor's local government deal. "Hindsight is a very cruel thing."
The Republican governor, following a path taken by previous governors, proposed a new state budget in January that would take $1.3 billion in property-tax revenue from local governments to help close a huge budget gap.
Local government groups, tired of the state dipping into their funds, placed an initiative on the November ballot, Proposition 65, that would block the $1.3 billion raid this year as well as future raids.
Democratic legislators believe Proposition 65 would be easily defeated by a well-funded campaign from school groups and others, who fear that locking up local funds would make their programs more likely to be slashed in future budget crunches.
But Schwarzenegger, who cut deals with school groups and university officials that make funding reductions this year in exchange for increases later, reached a similar agreement with local government groups.
The state would take $2.6 billion from local government over two years in exchange for placing a measure on the November ballot that would prevent future raids. Under that agreement, local government would not push passage of Proposition 65.
When Democratic lawmakers balked at the deal, the governor's aides negotiated a compromise with Democrats that was rejected by big city mayors, producing a bitter partisan blowup in the Capitol as the new fiscal year began.
Assembly Democrats said Schwarzenegger had agreed to the compromise and then "flip-flopped" under pressure from the cities. A spokesman said the governor's support for the compromise always depended on city approval.
Now Democrats are moving a ballot measure, SCA 9, that would allow the state to get a loan from local governments, limited to twice a decade with a cap on the amount.
Democrats say local governments could use the guaranteed state repayment of the loan with interest to issue bonds to cover their temporary loss of revenue.
But Schwarzenegger and the cities are insisting that the loans from local government require more than a two-thirds vote of the Legislature. That's the vote threshold needed for a state budget, which local officials note has not protected them from previous raids by the state.
Another issue is that Democrats do not want the new loan requirement to apply to the growth in property-tax money, which the cities say would allow the state to continue to raid a growing source of local revenue.
Democrats say they are mystified as to why Schwarzenegger, who had previously shown some skill at maneuvering through political minefields at the Capitol, let the budget get hung up on what they consider a minor issue.
Burton said local government funding has become a "smoke screen" for the real budget dispute: a demand by Republicans for the repeal of two laws backed by important Democratic constituencies – trial lawyers and labor unions.
One law allows workers to sue their employers for labor code violations and to receive part of any award. The other prevents school districts from contracting with private firms for services such as busing to save money.
Assembly Speaker Fabian Núñez, D-Los Angeles, has suggested that Republican legislators are demanding repeal of the two laws because of deals Schwarzenegger made with Democratic leaders that increase spending.
Núñez said the governor has agreed to restore enough funding to allow the admission of 11,400 eligible freshmen turned away from the University of California and California State University this fall because of budget cuts.
Burton said his agreement with the governor would delay cost-of-living increases for the CalWORKS welfare program as well as aid to the aged, blind and disabled for one-quarter of the new fiscal year, avoiding deeper cuts that Schwarzenegger had proposed.
The Republican legislative leaders, Sen. Dick Ackerman of Fullerton and Assemblyman Kevin McCarthy of Bakersfield, have said they are unaware of any deals Schwarzenegger has made on higher education and welfare funding.
A Democratic-controlled budget committee, which had not met since June 10, approved a new budget yesterday that Democrats said contains their agreements with the governor.
General-fund spending in the Democratic budget is about $1.6 billion above the revised budget that Schwarzenegger proposed in May, according to a preliminary estimate from his Department of Finance.
The governor's May proposal already had increased spending about $1.7 billion above his original proposal in January, mainly because he dropped cuts in Medi-Cal and other programs opposed by Democrats.
The Democratic budget, with a total of about $79 billion in general fund spending, is expected to be blocked by Republicans during floor votes next week because there is no agreement on the unresolved issues.
Meanwhile, Schwarzenegger has shown no regret about cutting a deal with local government as the budget deadlock drags on. He said he promised during his campaign last year to protect local government funding.
The governor said that standing with Democratic mayors, such as James Hahn of Los Angeles and Jerry Brown of Oakland, reflects his goal of bipartisan governing.
The governor also said he stands with the people on protecting funding for local government services such as police, fire, garbage service and public health.
"When you ask anyone out there on the street, what is the most important service that a government ought to provide for you, this is public safety," Schwarzenegger said this week at a Sacramento sheriff's station.
In an odd turn of events, four years ago Burton was leading the charge to protect local government funding. But his bill to begin reversing a decade-old state raid on property-tax revenue was vetoed by former Gov. Gray Davis.
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